Airbus challenges Boeing with vow to create US jobs

Airbus on Tuesday threw down a challenge to Boeing in its home market declaring it would turn Bombardier’s C Series passenger jet into “an American aircraft that will create American jobs”.

The European aircraft maker moved to turn the tables on its US rival late on Monday by acquiring a 50.01 per cent stake in the C Series programme for C$1. It followed a threat by the US Department of Commerce to slap 300 per cent tariffs on the regional airliner.

Boeing had complained that the C Series, assembled in Canada with wings made in Northern Ireland, had been funded with illegal UK and Canadian subsidies and dumped below cost into the US. 

Fabrice Brégier, Airbus chief operating officer, insisted that the US market would be “one of the big markets for this aircraft” despite the tariff threat as Airbus planned to build C Series planes in Alabama.

The Airbus deal marks a significant setback for Boeing which has taken an aggressive stance on the funding of the C Series since Bombardier won an order for 75 aircraft from Delta Air Lines last year. Although Boeing did not compete for that order, which was for a smaller jet than the US company had in its portfolio, it has argued that the deal caused lasting damage by dragging down industry pricing. 

The commerce department rulings on tariffs, to be confirmed early next year, risked blocking the world’s biggest market for regional aircraft to the Canadian manufacturer. “It doesn’t matter whether the tariff is 10 per cent or 300 per cent. It would kill us,” said one person close to Bombardier.

Boeing said on Tuesday that the deal had “no impact” on the US trade proceedings. “Any duties finally levied against the C Series (which are now expected to be 300 per cent) will have to be paid on any imported C Series aeroplane or part, or it will not be permitted into the country,” said J. Michael Luttig, Boeing general counsel, although he did not directly address the situation of Bombardier jets made in Alabama as planned under the Airbus deal.

Airbus’s control of the C Series will not take effect for another year. The deal will have to be approved by regulators in the US, Europe and elsewhere. 

But unions and politicians welcomed the agreement as security for thousands of workers in Canada and Northern Ireland.

Boeing’s allegations of illegal subsidies had aggravated the UK and Canadian governments, which feared thousands of job losses.

 Mr Brégier said the deal secured Bombardier’s wing factory in Belfast, where some 4,000 jobs were thought to have been at risk. The Belfast factory is particularly sensitive for the UK’s conservative government, which relies for its parliamentary majority on the support of Northern Ireland’s Democratic Unionist Party.

Bombardier shares leapt to their highest level in two years on news that Airbus was taking over control of the C Series programme.

Mr Brégier said he did not expect Boeing to drop its claims about the C Series. “I don’t expect my competitor will not challenge us,” he told the Financial Times. “But I am very sure that the C Series assembled in America with huge American content above 50 per cent will be an American aircraft that will create jobs in America.” 

Wilbur Ross, the US commerce secretary, said the Trump administration would examine the deal. “At this time, we don't know enough about this new development to comment on its potential impact,” he said. 

But trade lawyers said the plans to assemble the C class jets in Alabama may not be enough to circumvent the threatened tariffs if the aircraft continue to be made largely of parts from outside the US. 

 “It's not going to be that easy to just get around the tariffs,” said Chad Bown, a trade expert at the Peterson Institute for International Economics, adding it could lead to new litigation by Boeing that could drag on for years.